Maersk Expects Uptick in Fuel Costs Due To New Maritime Regulations

Date: Friday, February 23, 2018
Source: Wall Street Journal

Denmark’s A. P. Moeller-Maersk A/S is bracing for higher expenses stemming from new rules that limit the sulfur content of bunker fuel from 2020 onward, the company’s finance chief said.

“That could mean higher fuel costs for us,” Chief Financial Officer Jakob Stausholm said Wednesday in an interview with CFO Journal.

 

The International Maritime Organization’s new rules require ships to use marine fuel with a sulfur content of less than 0.5% by 2020, compared to the current level of 3.5%. Ships are already obliged to do so on certain routes, but not on a global basis.

“This type of fuel is about 50% more expensive,” said David Kerstens, an analyst at Jefferies LLC. Maersk in 2017 spent $3.3 billion on bunker fuel, according to Mr. Kerstens.

The company’s Maersk Line is the world’s biggest container operator in terms of capacity, commanding a market share of close to 20%, according to Morningstar Inc.

The shipping giant is considering passing the higher costs on to customers, Mr. Stausholm said. After years of overcapacity in the container shipping business, Maersk is hoping for better sea freight rates in 2018 and beyond, Mr. Stausholm said.

Maersk should be able to offset the negative impact of higher fuel costs as long as other competitors, including China’s Cosco Shipping Co. Ltd. and Germany’s Hapag-Lloyd AG, also opt to charge customers more, Jefferies’ Mr. Kerstens said.

The firm’s IT infrastructure is more robust following a large scale cyberattack last year, Mr. Stausholm said. “If we are taken down again, we would be much more capable to bring our IT back up,” he said. He did not disclose how much the company spent on improving its cyber defenses.

Mr. Stausholm said he also plans to revamp the company’s finance unit. “We are looking at automation, AI [artificial intelligence] and robotics,” Mr. Stausholm said.

Maersk is trying to reshape itself into a global-supply chain company like United Parcel Service Inc. and FedEx Corp. to reduce its reliance on freight rates, Mr. Stausholm said. The company in January entered a joint-venture with International Business Machines Corp. to create a global trade platform using blockchain technology. That will reduce the amount of manual work needed when processing a container, Mr. Stausholm said.

The company last year shed assets by selling its tankers unit to its controlling shareholder for $1.17 billion. It also sold its Maersk Oil business to France’s Total SA. This year, Maersk plans to sell or list its Maersk Drilling division as well as its Maersk Supply unit, a fleet of support ships for offshore operations, Mr. Stausholm said.

Click here to read the entire article from the original source.

BROWSE MORE ARTICLES

E-MAIL TO COLLEAGUE

NOTIFY ME WHEN NEW ARTICLES ARE POSTED

SOUND FAMILIAR? HAVE A SLIGHTLY DIFFERENT ISSUE? CONTACT US

Have the News Delivered to you

Like what you see here? Why not let us send it directly to you?
Sign up to receive our Weekly Industry Newsletter, a compilation of all news articles that matter to you and your business.